Ebos shares hit a record after it promised "a significant increase" in earnings this year following a flat result for the year ended June.

Annual net profit rose to $137.7 million from $137.3m the previous year while sales fell 0.8 per cent to $6.93 billion, reflecting lower hepatitis C medicine sales in Australia and the impact of reform of Australia's pharmaceutical benefits scheme.

Combined, those two causes reduced revenue by $425m. Ebos says its underlying profit rose 5.2 per cent.

A loss on the sale of surplus property, transition costs for new major warehouses and transaction costs all had a $6.7m one-off impact on the bottom line.


Ebos spent $93.6m on acquisitions and raised $175m in fresh capital during the year.

The company estimates it has $300-350m available for acquisitions while still keeping its net debt to earnings before interest, tax, depreciation and amortisation ratio between 1.7-2.3 times. That measure stood at 1.41 times at June 30.

Investors appeared to like the results because Ebos shares rose as much as 4.5 per cent to a record $25.60 before easing to $25.25. The shares are 21 per cent higher than a year ago.

"2019 has been a year of high activity and strategically important for the group as it has set the foundation for the next wave of growth," chief executive John Cullity says in a statement.

"We commenced operations in two brand new facilities in Brisbane and Sydney providing further warehouse capacity. We also moved to 100 per cent ownership of TerryWhite Chemmart, signed the Chemist Warehouse Group pharmaceutical contract and retained Blooms The Chemist, one of our largest independent pharmacy group customers," Cullity says.

The Chemist Warehouse Group contract, which will add about $1b to sales, kicked in from July 1 and Ebos says the "big bang" start to supplying the group's more than 450 stores across Australia "has been at our normal high standards of excellence, ensuring a very smooth transition."

The company says it will update shareholders on the outlook for the current year at the annual shareholders' meeting on October 15.

Ebos will pay a final dividend of 37 cents per share, taking the annual payout to 71.5 cents, up 4.4 per cent on the previous year.


The dividend, which will be paid on October 11 to those on the register on Sept. 27, is fully-franked for Australian shareholders but only imputed to 25 per cent for New Zealand shareholders.

Shareholders can elect to take shares in lieu of the dividend at a 2.5 per cent discount to the volume-weighted average share price.

Cullity says the community pharmacy division continues to operate in highly competitive markets.

"We have withstood changing market dynamics and competitive pressures and delivered both solid underlying earnings growth and another strong cash result."

The firm's cash-flow from operations fell 26.9 per cent to $118.5m while free cash flow eased 11.7 per cent to $92m, reflecting the costs of gearing up for the Chemist Warehouse Group business and the unwinding of cash benefit of the hepatitis C business.

The overall healthcare segment saw sales ease 0.9 per cent to $6.5b while underlying ebitda rose 4.6 per cent to $226.6m.

Cullity says healthcare revenue in Australia fell 3.5 per cent but underlying ebitda there rose 5.7 per cent, "driven primarily by the performance of our institutional healthcare and Contract Logistics businesses."

Cullity says the financial stability of the pharmacy industry is at a "critical juncture" with wholesalers being significantly impacted by reform of the pharmaceutical benefits scheme.

"Approximately 80 per cent of distribution volumes now generate a margin of less than $1, given there has been no effective increase in wholesaler remuneration since 2010," he says, arguing that the Australian government has to provide additional financial support if the wholesale industry is to maintain its service standards.

New Zealand healthcare earnings were flat with revenue growth of 8.7 per cent largely offset by higher labour and freight costs in the wholesale business.

The healthcare segment's consumer products division, which includes the Red Seal and Faulding brands, lifted revenue 4.9 per cent, driven by both organic growth and the acquisition of Quitnits, a brand sold in Australian grocery outlets for treating head lice.

Ebos' animal care segment lifted revenue 1 per cent to $382m and ebitda rose 5.7 per cent to $48.3m.

Cullity says the Black Hawk brand remains one of Australasia's fastest-growing pet food brands with sales growth of 11.4 per cent in the latest year.

Overall pet division sales were impacted by a manufacturer's decision to bypass the wholesale channel which shaved about $21m off revenue.